ICAEW ARF · Chapter 1 · Question 9 of 10
A small company is exempt from statutory audit but its directors are considering a voluntary audit. Which of the following is a genuine benefit of a voluntary audit?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: A) Lenders and suppliers may place greater reliance on the financial statements when deciding whether to extend credit
Explanation
An independent audit adds credibility to the financial statements, which can help when negotiating finance or credit terms; the auditor may also highlight control weaknesses. The directors remain responsible for the financial statements and for keeping accounting records whether or not there is an audit. An audit does not guarantee the future viability of the business.
More The concept of and need for assurance MCQs
- Q1Which of the following is NOT one of the elements of an assurance engagement?
- Q2In the statutory audit of a UK limited company, which party is the 'responsible party' in the three-party relationship?
- Q3Which of the following wordings would be typical of the conclusion in a limited assurance engagement?
- Q4What is the main reason why the shareholders of a large company need an independent audit of its financial statements?
- Q5Which of the following is NOT an inherent limitation of an audit?